Market orientation, customer satisfaction and productivity in the service industry : a data envelopment analysis

Abstract

A crucial cornerstone in the market orientation literature is the relationship between market orientation and performance. Products and services should be designed, developed and offered to customers based on market knowledge, and human and physical assets should be combined to satisfy customers. However, we still lack knowledge whether the most market-oriented firms are the most productive and profitable, as few empirical studies have used objective performance measures. By applying data envelopment analysis (DEA), we develop a measure of relative productivity, and test the market orientation model with productivity as performance measure. Based on data from the hotel industry, our results indicate that market orientation has only modest effect on productivity. However, DEA-productivity analyses can be used to identify best practice in an industry, and if used properly, it can be a useful instrument in the process of designing products and services and be a valuable input into the market orientation of the firm.